The district and the city each have produced financial reports through outside consultants that have weighed the outcomes of having Goleta no longer use GWSD’s services. The detachment must be approved by LAFCO, and the city’s report is the result of LAFCO’s request for additional information.

The wastewater treatment facility used by both districts is owned by the GSD, and each district owns a portion of the pipes throughout the city and surrounding areas.

The City Report

Goleta officials met with the media Tuesday and then presented the financial report to the City Council. The report, prepared by Bartle Wells Associates, concluded that it would fiscally benefit the city to detach from GWSD because it would cut costs with no implication of raised rates for residents.

The city could potentially cut costs by eliminating duplicate administrative and other staff positions, and it wants to equalize rates throughout the city.

Ernest Tedeshi of Bartle Wells Associates presented key points from the 31-page report, and the council agreed with its conclusions that the city and its residents would benefit financially from detachment.

Key points from the report included:

» Of the property taxes GWSD receives, about 78 percent come from within Goleta, and 52 percent of flow (usage) is within the city limits.

» GWSD subsidizes its operating budget with property taxes (doesn’t make enough from service fees alone).

» The district’s service is the second least expensive in the area, after Santa Maria.

» GWSD’s $29 million in reserves is mostly set aside for its share of the treatment plan upgrade.

If the city detached, it would take over street-sweeping duties. The fate of the areas served by GWSD has two likely scenarios: be contracted out to GWSD, or get annexed into the GSD coverage area.

Goleta’s Issues with GWSD

During Tuesday’s media roundtable and the council meeting, it became clear that assumptions had dictated some of the reports’ directions. Reports by the two agencies contradicted each other and claimed the other had false information.

Some expenditures — such as the prefunded pension liability for the Goleta West Sanitary District’s six employees, estimated at about $1.1 million — have city staff wondering about the way money is spent by the district.

The tension focused on the way the district spends property taxes. Created before Proposition 13, GWSD receives property taxes as well as service fees from its users. Its service fees don’t cover the operating budget, so taxes are used to subsidize it. The district’s rates haven’t increased since the mid-1990s, GWSD general manager Mark Nation said.

If the district receives federal money, it would be required to sustain its operating budget purely from service fees, City Manager Dan Singer said.

However, the GWSD doesn’t receive any federal money, so it operates within the guidelines, said Steve Amerikaner, the district’s general counsel.

The issue of assets will be decided by LAFCO if detachment is approved, and Singer said the application is “not just a money grab.”

The city finished in the black last fiscal year and is in a good financial state, but it sees long-term cost savings and better efficiency through detachment from GWSD, he said.

The way the district uses funds may not be as “judicious” or “frugal” as the city once believed, Singer said during Tuesday’s media meeting.

City staff and Bartle Wells Associates also had issues with some of the figures in GWSD’s April report, including its shared use charges. The district predicted that the city should pay $500,000 to $700,000 per year for pipe depreciation and replacement, which Singer called “grossly excessive.” Goleta’s consultants determined that the city should pay about a fifth of that.

When Goleta residents voted for incorporation, the mandate included the likely detachment from GWSD, Goleta Mayor Roger Aceves said Tuesday.

“Having two sanitary districts in as small an area as the Goleta Valley does not make good economic sense,” he wrote in a statement. “It is not efficient, nor is it conducive to good government.”

Aceves and others want Santa Barbara County to follow Goleta’s lead and detach from GWSD, which affects the district’s coverage of Isla Vista and the Embarcadero areas.

The GWSD Reports and Response to the City

Nation and Amerikaner attended Tuesday’s council meeting and prepared a memorandum for the GWSD board of directors, which responded Tuesday night to the Bartle Wells report.

The memo took issue with the city’s “faulty assumptions” regarding rate increase projections, efficiency evaluations and the district’s spending practices.

The district’s $29 million in reserves were carefully saved in anticipation of its share ($20 million out of a $50 million project) of the treatment plant funding and other capital projects, Nation said.

Saving is an appropriate use of funds and avoids taking out loans in the form of municipal bonds, Amerikaner noted. “People who save may be more prudent than those who would borrow,” he said.

Amerikaner said he also takes issue with the claim that the current rates are “unsustainable.”

“They’ve been the same rates for 12 years, and we’re saving money,” he said.

The district has rate increases planned for the future, but nothing as drastic as presented in the Bartle Wells report, Nation said.

The GWSD memo also stated that the operational savings were overestimated given last year’s unprecedented legal and consultant fees — a result of the city’s detachment proposal.

An absence of Revenue-Neutrality Agreement figures also was brought up in the memo. The county gets a percentage of property taxes and would get a percentage of all assets transferred to the city from GWSD. The city has been negotiating with the county over the percentage, city attorney Tim Giles said.

The assets could be spent in nonsanitary programs, as the City Council would be the new board of directors and could make all budgetary decisions, but Singer said the city doesn’t intend to defer all the funds elsewhere.

Next Steps

The application for detachment will be completed within weeks, and it will go before LAFCO in March at the earliest, given its South County meeting schedule, Singer said.

The commission also has the right to determine how GWSD’s assets would be allocated if the application is approved.

Both of the financial reports were created by outside consultants. The city paid Bartle Wells Associates $20,000, and the district paid Raftelis Financial Consultants thousands of dollars as well, although Amerikaner and Nation did not know the exact figure.

— Noozhawk staff writer Giana Magnoli can be reached at .(JavaScript must be enabled to view this email address).

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